Estimated time to read: 5 minutes.
Competitive analysis is a mandatory step for any company wishing to build a market study, carry out a business plan or adopt a new marketing strategy. How to clearly identify your competitors? What data is essential to collect? And what steps should be taken to complete this study?
Table of content:
- What is competitive analysis?
- How to do a competitive analysis?
- Step 1: Clarify the objectives and establish a study framework
- Step 2: Identify the competitors
- Step 3: Criteria to be analyzed by competitors
- Step 4: Analysis the competition
- Step 5: Analyze the results
What is competitive analysis
Competitive analysis is a study of the situation of a business (existing or in the process of being created), in its market environment to know the intensity of competition. It is an important component of market research and strategic analysis of an organization. It makes it possible to establish a map of the players present in the target market and to diagnose their strengths and weaknesses to adopt a differentiating positioning and strategy.
Competitive analysis also helps to verify the viability of a project. Indeed, this study can reveal a saturation of the market by the competition with an overflow of offers compared to the demand or the presence of a giant monopolizing the market in question. In both cases, it seems difficult to establish yourself in the market even with the right tools and a well-established marketing strategy.
It is therefore essential to conduct a competitive analysis before launching a new offer. To carry out this study under the best conditions, it is necessary to establish an analysis plan.
How to do a competitive analysis?
Competitor analysis must be carried out about the company's objectives and its positioning in the competitive environment. A 5-step methodology is ideal for studying the competition as a whole and drawing conclusions that will help in decision-making and building a business and marketing strategy.
Step 1: Clarify the objectives and establish a study framework
Before embarking on the actual competitive analysis, it is essential to define the research framework by first clarifying the objective. Even though the objective of a competitive analysis may differ depending on the size of the company, its age or its sector of activity, its purpose is almost always the same: to gain market share. By going a little deeper, it is possible to focus the objective on a particular point:
- Check the viability and sustainability of a project (business creation, launch of a new offer)
- Identify an opportunity (niche market, new trend)
- Adopt a distinctive positioning (quality, image, price)
- Refine or redesign a marketing or communication strategy (resources, graphic charter, messages)
Having defined the objective more clearly, it is time to identify the main competitors and their degree of competition with the company's product or service.
Step 2: Identify the competitors
Competitive analysis places particular importance on the distinction between direct and indirect competitors. On the one hand, direct competitors represent players marketing an offer like yours. On the other hand, indirect competitors offer goods or services with notable differences, but meeting needs that remain substantially the same. In the context of the analysis, considering only direct competition would not be relevant since the customer's need is one of the main concerns of the market research.
When identifying competitors, it is important to separate those who have a similar offering from those who offer a different product, while targeting the same consumers. Thus, the list of competitors can have two different columns to separate the indirect competitors from the direct competitors. The two categories will not respond to the same strategic issues.
Step 3: Criteria to be analyzed by competitors
Once your competitors are listed, describe them individually by integrating their characteristics. The main criteria to be listed are:
- The history of the company.
- The geographic location.
- Internal organization.
- The business strategy.
- The size.
- The offer.
- The pricing and distribution policy.
- The communication strategy.
The seed list takes the form of a competitive benchmarking table, also known as competitive benchmarking. You can then start to analyze the identified competitors, using different tools. Do not hesitate to cross-check them to make the analysis more efficient.
First, essential marketing tools like SWOT analysis and the Porter method will be effective in analyzing the listed competitors individually. You can also use the BCG matrix, if the competitive analysis is carried out as part of the launch of a new product or service.
Step 4: Analysis the competition
Analysis of the data collected on competitors can be done using various tools:
- Competitive mapping makes it possible to present the position of competitors on a graph according to relevant criteria, for example quality or price
- The analysis of competitive forces according to the Porter method (see below),
- The SWOT analysis allows in the context of a competition analysis to list:
- Opportunities, for example the absence of a competitor in a niche,
- Threats, for example the arrival of new entrants or substitute products,
- Strengths, for example a competitive advantage developed internally,
- Weaknesses, for example lack of internal skills,
- The BCG matrix of the product portfolio consists of classifying the ranges of the company and its competitors into 4 categories: star products, dilemmas, deadweight, and cash cows,
- The competitive analysis grid consists of presenting the strengths and weaknesses of each competitor in a table, to facilitate comparison and analysis.
Step 5: Analyze the results
The primary and ideal objective of competitive analysis is to find the best place for the company in each market. For this, the competitive analysis must respond to each of the positioning issues of the company, formulated upstream of the study.
Data collected on competition is only of value if it is used to justify strategic choices. The results of the competitive analysis provide an answer on the positioning to be adopted and lay the foundations for the future strategy.
It is therefore essential to draw conclusions from competitive analysis, and not to stick to outright competitor analysis. This last phase aims to draw strategic conclusions by considering all the analytical approach deployed during the study.
Competitive analysis, like money, is a great servant but a bad teacher. Being responsive to what the competition is doing can be worse than doing nothing.
At the same time, knowledge is synonymous with power. Just knowing how you stack up against your competition in the minds of customers can make all the difference.
You may find that adding regular competitive analysis to your CRO process and tailoring your strategy based on that analysis will fuel your creative engine and positively impact conversions.
Competitive analysis doesn't have to be a standalone, Herculean endeavor - you can build it right into the research you're already doing.
Stay tuned with SHOPLAZZA blog!